Wall Street also will scrutinize Friday's November jobs report for signs of whether the Federal Reserve will end its interest rate hikes soon, analysts said.
"Consumers may or may not have cut back on retail spending, given the high cost of energy," said Tim Ghriskey, chief investment officer of Solaris Asset Management.
U.S. crude oil futures prices have slid 17 percent from their peak of $70.85 in late August. But they are still high enough that winter heating and driving costs are a concern to consumers -- and retailers.
After five straight weeks of gains, the three major U.S. stock indexes are poised to extend the rally into December.
Stocks often go up in December in the time-honored year-end rally. But any sign of inflation could keep the Fed raising rates and derail the market's gains, analysts said.
"Historically, the fourth quarter is very strong ... and you take a little bit of a pause the week after Thanksgiving," said Anthony Chan, managing director of JP Morgan Asset Management. "But I think the data will be supportive enough that you'll be able to counteract those seasonal movements. I don't see any land mines out there."
For the past week, the Dow Jones industrial average (^DJI - news) rose 1.5 percent, while both the Standard & Poor's 500 Index (^SPX - news) and the Nasdaq Composite Index (^IXIC - news) gained 1.6 percent. For November, the Dow is up 4.7 percent, while the S&P 500 is up 5.1 percent, and the Nasdaq is up 6.7 percent.
FROM WAL-MART TO TIFFANY
Shoppers spent $27.8 billion in stores and online during the three-day weekend, starting on Black Friday, the day after Thanksgiving and the traditional kick-off of the holiday shopping season, according to a survey conducted for NRF, a Washington-based trade group. That was up 21.9 percent from last year's spending, the NRF said.
The NRF's report on strong holiday spending contrasted with figures released on Saturday by ShopperTrak, a retail research group, which estimated nationwide sales on Black Friday alone totaled $8 billion -- down 0.9 percent from last year.
Wal-Mart Stores, Inc. (NYSE:WMT - news), the world's largest retailer, on Saturday estimated that November sales rose 4.3 percent at its U.S. stores open at least a year. Sales on the day after Thanksgiving were better than it had expected at both its namesake discount stores and its Sam's Club warehouse stores, Wal-Mart said in its weekly recorded message.
Recent declines in gasoline prices and other positive economic indicators led the NRF to raise its retail sales forecast last week to a 6 percent gain over 2004, up from an earlier forecast for a 5 percent rise.
But with stores competing to give consumers steep discounts, analysts wonder whether strong sales figures will be enough to make the retailers profitable.
"To drive the 5 (percent) to 6 percent sales growth that people are estimating, it's going to come at the expense of margins and the question is: 'To what extent?"' said Peter Boockvar, equity strategist at Miller, Tabak & Co.
More information on consumer spending for holiday gifts and big-ticket items like washing machines, homes and cars will come from this week's blitz of U.S. economic data.
Weekly store sales are due on Tuesday, while monthly chain-store sales are expected on Thursday.
Existing U.S. home sales are due on Monday, with new home sales and durable goods on Tuesday. Data on third-quarter
GDP growth and the Federal Reserve's Beige Book report will be released on Wednesday. November car and truck sales, plus October personal income and consumption, are set for Thursday.
But the Conference Board's November consumer confidence number, due on Tuesday, may be the most eagerly awaited indicator of this holiday season.
"This is basically going to be telling us what kind of momentum we have going into the holiday season," Chan said.
A glimpse of the luxury spending sector will come on Wednesday, when jewelry retailer Tiffany & Co. Inc. (NYSE:TIF - news) is expected to report third-quarter earnings.
IT'S A LIVING
The November U.S. nonfarm payrolls report "will likely provide the first clean read of job creation since Hurricane Katrina struck on August 29," said Chris Rupkey, vice president and senior financial economist of Bank of Tokyo/Mitsubishi.
Economists polled by Reuters estimate that U.S. payrolls added 210,000 jobs in November, up from 56,000 in October.
Average hourly wages, deemed an inflation indicator, are believed to have gone up just 0.2 percent in November, after a gain of 0.5 percent in October.
FINDING THE FED'S MAGIC NUMBER
Any softness in Thursday's retail sales or Friday's payrolls would back the idea that the Fed will stop raising the fed funds rate when it gets to 4.5 percent, and that could push stocks higher, Boockvar said.
Wall Street also will watch the Institute for Supply Management's monthly manufacturing index, due on Thursday.
"The market is more sensitive now to the economic data than it's been in a long time because of this debate about the Fed being almost done," Boockvar said.
The Federal Reserve's November 1 minutes, released last week, hinted that the central bank was considering how and when to end the interest-rate increases that began on June 30, 2004. Its fed funds rate for overnight bank loans now stands at 4 percent.
But Jeffrey Lacker, president of the Federal Reserve Bank of Richmond and a voting member of the Fed's rate-setting committee, said it was still too early to call when the Fed's tightening campaign would end.
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